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    A Law with Dark Corners

    A Law with Dark Corners / Fernando Damaso
    Posted on April 19, 2014

    The Foreign Investment Law, debated and approved by the National
    Assembly in extraordinary session, has some worrisome aspects, both for
    foreign investors as well as for Cuban citizens.

    It seems that Cubans living in other countries are not covered under the
    law since the definition of a domestic investor applies only to current
    legal residents of Cuba and to cooperatives. The latter are legally
    recognized non-state administrative entities which may participate as
    domestic investors in projects financed with foreign capital but which
    remain completely under state control to prevent the accumulation of
    excess wealth.

    Elsewhere, investment priority is usually given to a country’s own
    residents, then to its overseas residents and lastly to foreigners. In
    Cuba it is the opposite: foreigners get top priority. Afterwards, we
    have to listen to authorities tirelessly proclaiming themselves to be
    the defenders of national dignity, independence and sovereignty.

    The claim that investments “may not be expropriated except for reasons
    of public utility or social interest, as previously defined by the
    Council of Ministers” should give one pause. This is a well-established
    procedure in most countries. Before such actions can be taken, they must
    be discussed and approved by legislative bodies (a house of
    representatives, senate, parliament or national assembly).

    It is a process in which those concerned — governmental authorities as
    well as those in the opposition who may hold with differing views —
    participate fully. Final implementation is subject to review by the
    judicial branch, which makes sure any such actions do not violate the
    constitution.

    This is not the case in Cuba where the National Assembly is made up
    exclusively of deputies from one party. It is a legislative body without
    an opposition in which anything the government proposes is approved
    unanimously. The Cuban judiciary, which is nothing more than an appendix
    of the government, also has no independence.

    In spite of anything that has been stipulated in writing, investors lack
    any real protection or legal recourse. They remain subject to decisions
    by a centralized authority in the person of the president, who for
    political, ideological or circumstantial reasons can act as he pleases
    without having to consult anyone, as has happened repeatedly over the
    last fifty-six years.

    Regarding employment of Cuban citizens, the law stipulates that an
    investor must hire workers through an employment agency selected by the
    Ministry of Foreign Trade and Foreign Investment and authorized by the
    Ministry of Labor and Social Security. Payment to workers would be by
    mutual agreement between the investor and the employer. Neither exchange
    occurs between the investor and the worker directly but through a state
    intermediary.

    Though the purported purpose is not to generate revenue, it stipulates
    that a portion of the wages paid by the investor will be retained to
    cover costs and expenses for services provided.

    As one might expect, there is a big difference between what the investor
    pays and what the employee receives. The salary paid to the employee
    will correspond to a minimum wage set by the employment agency, which it
    claims will be higher than that for the country’s other workers. Also
    factored in will be a coefficient which will allow the agency to adjust
    salaries based on a worker’s performance.

    The unfortunate history of low pay for doctors, teachers, athletes and
    other professionals working overseas to fulfill the Cuban government’s
    contracts with other countries speaks volumes.

    It would perhaps have been advantageous to draft an investment law that
    also regulated state investments (considering the many examples of bad
    investments made over the years). It might also have covered private
    investment, differentiating between foreign and domestic investment.

    In regards to domestic investment, it might have included both
    investment by Cubans living on the island as well as those living
    overseas, especially since the latter currently must also possess a
    Cuban passport to enter and exit the country, thus confirming their
    legal status as Cuban citizens.

    This law is not free from the burden of obsolete concepts of failed
    socialism, with the objective in ensuring a leading role for the state.
    It lacks sufficient transparency to really stimulate foreign investment
    and includes some traps into which those who bet on it, without giving
    it enough thought, might fall.

    7 April 2014

    Source: A Law with Dark Corners / Fernando Damaso | Translating Cuba –
    http://translatingcuba.com/a-law-with-dark-corners-fernando-damaso/

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